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    In April 2007 I wrote an article for the Roundup titled “What Exactly Is Stagflation?” At that time our economy showed early signs of stagflation. It is time to revisit that article because stagflation has been confirmed.
    Stagflation is a combination of stagnation and inflation. Stagnation is recession, a slowing economy. Stagnation refers to an economic period of very little or no economic growth. Specifically, stagnation refers to economic growth of less than two to three percent annually. While we do not benefit from a booming economy during times of stagnation, neither do we pay more for goods and services.
    Inflation, on the other hand, refers to a sustained increase in the overall prices for both goods and services. As inflation rises, it takes more dollars to purchase goods and services. The value of the dollar is noted in terms of purchasing power. During inflationary times, purchasing power falls dramatically.
    Stimulating the economy – lowering taxes to put more purchasing power into the consumer’s hands – treats stagnation. Don’t raise taxes, Barack! As these dollars move through the system, more goods are produced to meet the needs of consumers with dollars to spend. More jobs are created to produce the additional goods and services demanded, and as employment rises, wages also increase.
    Inflation becomes a problem when demand for goods and services outpaces production of those goods and services. There are too few goods on the market for the number of consumers. Thus, prices rise. Chinese and Indian economic growth is putting pressure on the world’s supply of raw materials and commodities creating problems such as our higher fuel costs. It is the basic law of supply and demand, with supply on the low side and demand on the rise. Inflation hits fixed income investors the hardest.
    What is an economist to do? If our government lowers taxes and places more money in the hands of the consumer to purchase additional goods and services, they have decreased our chance of stagnation. However, placing more dollars in the hands of the consumer to compete for goods and services when demand is outpacing production means that inflation will soar.
    Stagflation describes a period of high price inflation combined with a period of slow economic growth, high unemployment and even recession. “Stag” refers to a sluggish economy combined with “flation” referring to rapidly rising consumer prices.
    Fiscal and monetary policies used for directing economic growth either slow growth to reduce inflationary pressures or allow an increase in price of goods while generating higher production. Stagflation creates a policy nightmare because efforts to correct one problem increase the other.
     The Federal Reserve can stimulate the economy and create jobs by lowering interest rates and thus increasing money supply, allowing consumers to demand more goods and services. But this increases the risk of inflation. They can pursue a tighter monetary policy by raising interest rates to reduce inflation, but this increases the risk of high unemployment and slow economic growth. At some future point, our Federal Reserve will have to raise interest rates to curb inflation.
    The best fiscal policy for stagflation is not clear. One idea is that government should stimulate growth through lower taxes and increased spending while the Federal Reserve raises interest rates to fight inflation. Coordinating fiscal and monetary policies through different agencies might be tricky. Another theory suggests this problem is the result of excessive government regulation. In this case, it has been suggested that monetary policy might continue to regulate inflation while deregulation of our markets allows them to more effectively reflect true supply and demand.
    Stagflation was an issue in the United States during the 1970s, particularly during the Carter administration. Stagflation is certainly a conundrum for investors. The best investments during inflation are not the securities to own during stagnation/recession. My hope is the government recognizes we do not want to be where we were during the Carter administration and resolves the uncertainty.
     Inflation means it is NOT time to own fixed income products. Fixed income securities include certificates of deposit, bonds and fixed annuities. A fixed income investment is anything where the rate of return is “fixed” or locked in for a certain length of time. As prices rise, the fixed income investor cannot raise his/her return to meet the demand of a higher cost of living because the return is “fixed.” They may be forced to dip into principle to make ends meet, and this decreases net worth, which also decreases future earnings. Spending principle means your portfolio takes a hit, the same hit that a growth portfolio takes with a market correction. However, money spent is never recovered. With a well-diversified growth portfolio, market losses are generally recovered over the long term assuming the stocks owned are solid, reliable companies.
    There is a second reason to NOT own fixed income products during stagflation. When interest rates rise, the value of fixed income products such as bonds and annuities fall; they lose market value. Investors are not interested in purchasing your bond at four percent if they can purchase a new bond with a higher rate of return because interest rates have increased. If no one wants your fixed income product at the lower rate of return, the market value of that product decreases; you must sell it at less than maturity value to get anyone to buy it.
    During inflationary times, such investments as growth stocks continue to thrive, particularly in such sectors as energy, metals and mining. These firms enjoy high profit margins under inflationary cycles resulting in an earnings increase that is passed on to shareholders. Debt is locked in at a fixed rate of return, but a higher cost of living allows prices to rise. Fixed debt with rising prices equals more profit. Real estate investment trusts do well, again because debt is locked in while prices continue to rise.
    The opposite is true during economic cycles of stagnation, or recession. Stagnation means interest rates will fall. This is the time to own fixed income products such as bonds. As interest rates decline, your particular bond becomes more valuable because the rate was locked in at a higher return. Now other investors are willing to pay a premium for your higher return since anything they purchase today returns less interest. Utility stocks and preferred stocks also hold their value. Again, as interest rates decline, these firms can refinance debt at the lower rates to increase profits for shareholders. Pharmaceutical companies and food companies are good investments. Regardless of declining purchasing power, people continue to purchase both food and medications as necessities.
    During stagnation those investments that we consider true growth companies are hit hardest. Tech stocks, energy and metals suffer. Stagnation or recession is NOT the time to be a growth stock investor. Less purchasing power means consumers purchase fewer goods and services and make an attempt to conserve energy. Purchases in sectors such as tech and metals (autos, for example) suffer, and profits fall.
    During hard economic times such as stagflation, I feel all investors require a qualified financial advisor to help maintain their portfolio profitability and protect net worth. During times of economic growth, it is a question of profit and return. During times of economic downturns, and particularly during stagflation, it is a question of protecting net worth. Next month my article will tell you how to evaluate a financial advisor and choose a knowledgeable advisor who is right for you.
    Fred Dowd has more than 30 years experience as a portfolio manager. He founded The Fred Dowd Company, a very successful and well-respected money management firm with clients nationwide. His firm has become Yellowstone Partners. While no longer licensed in his field, Fred still participates in Yellowstone Partners as Chief Investment Officer and research analyst. He continues to help ranchers and businessmen nationwide with their investment portfolios. Fred is now at home on his ranch near Buffalo. He may be reached via telephone at 307-684-2169 or via email at This email address is being protected from spambots. You need JavaScript enabled to view it..
    Two of the many points of contention in the Nebraska v. Wyoming lawsuit were endangered species in Central Platte, Nebraska and the Deer Creek Dam and Reservoir Project in Wyoming.
    During the settlement process, in an effort to resolve these issues, the Bureau of Reclamation (USBR) agreed that if the State of Wyoming would fund improvements to Pathfinder Dam that would allow for the recapture of 53,493 acre feet of storage space lost to sediment, the USBR would agree to the use of its water right and facility to implement the following operations through a contract with the State of Wyoming:
     1. An Environmental Account with a capacity of 33,493 acre feet would be allowed to store approximately three percent of the inflow into the Pathfinder Reservoir to serve as the water contribution from the State of Wyoming to Platte River Recovery Implementation Program (PRRIP), which provides Endangered Species Act clearances for all Platte River Basin water users.
    2. A Wyoming account with a capacity of 20,000 acre feet would be allowed to store approximately two percent of the inflow into the reservoir to serve as a substitute for the Deer Creek Dam and Reservoir and that the USBR would operate this account to provide the same water supply benefits of 9,600 acre feet per year. The water will be used by the state in the following priority: 1) a supplemental municipal water supply that could serve municipalities from Encampment to Torrington; 2) a supplemental supply to provide replacement water for depletions from wells and tributaries in Goshen County; and 3) lease water to the PRRIP to recoup some project costs if the water is not needed for the first two items.
    The agreement between the USBR and the states of Colorado, Nebraska and Wyoming relating to the Pathfinder Modification Project (PMP) was codified through a stipulation to the settlement of the Nebraska v. Wyoming lawsuit (PMP stipulation), which was approved by the U.S. Supreme Court.
    The PMP enjoys the support of the many entities in Wyoming. Despite the fact the project will affect their supply and they must share the benefits from the water right and facility, federal contractors of storage water from Pathfinder Reservoir in Wyoming and Nebraska support the project. In Wyoming, the Goshen Irrigation District, the Hill Irrigation District, the Rock Ranch Irrigation District and the North Platte Water Users Association support the project. In addition, the Casper Alcova Irrigation District, the federal contractor for storage water in Seminoe Reservoir supports the project, even though Seminoe Reservoir could be affected by the restoration of the 53,493 acre feet of storage space in Pathfinder Reservoir. In addition, the City of Casper, City of Cheyenne and others have documented their support for the project.
    The Platte River Recovery Implementation Program, which was initiated on Jan. 1, 2007, and the promise of the environmental account in the Pathfinder Modification Project have already benefited water users in Wyoming by providing Endangered Species Act clearances for their federal actions. These water users include the communities of Casper, Cheyenne, Douglas, Rawlins, Saratoga, Sinclair and Torrington. In addition, clearances have been provided for livestock water facilities on Bureau of Land Management lands and irrigation facilities on U.S. Forest Service lands throughout the Platte River Basin. Further, clearances for extensions to contracts for Glendo storage water and the operation of all federal reservoirs in Wyoming are being provided.
    The recaptured storage space will enjoy the benefits of the existing 1904 priority storage right for Pathfinder Reservoir as the storage right is for 1,070,000 acre feet, which includes the 53,493 acre feet for the PMP. The Upper North Platte Valley Water Users Association (UNPVWUA) has expressed concerns that the project could increase water rights administration in the area above Pathfinder Reservoir. The UNPVWUA has suggested that the USBR should be prohibited from making any “calls” for water rights administration for the benefit of Pathfinder Reservoir. The entitlement to seek water rights administration for the benefit of your water supply is an inherent right of all holders of Wyoming water rights, just like the right to bring a lawsuit when you believe you have been unduly impacted by the actions of others. However, the determination of validity of the “call” for water rights administration rests with the Wyoming State Engineer. This is where protections exist for the UNPVWUA.
    The modified North Platte Decree provides independent water supply entitlements in each of the three major reaches of the North Platte River in Wyoming: above Pathfinder Reservoir, Pathfinder Reservoir to Guernsey Dam and Guernsey Dam to the Wyoming/Nebraska state line. During the irrigation season, each of these three segments is administered independent of the other reaches. Upon review of the Decree, the Wyoming Attorney General Patrick Crank issued a formal opinion concluding: “The State Engineer should not honor a request for priority regulation for Pathfinder during the irrigation season.”
    Pat Tyrrell, Wyoming State Engineer has addressed the matter in the following manner: “In summary, absent a set of facts we have yet to divine, it is difficult to conceive that additional regulations of diversions in the upper system for the benefit of Pathfinder Reservoir during the May 1 to Sept. 30 period would be equitable. Such a request for regulation would suffer significant additional scrutiny due to the construction of the Modified Decree and settlement stipulations, our language in our Governing statutes and rules, and other considerations as described in the recent Attorney General’s opinion.”
    The North Platte Decree contains provisions describing when a request for water right administration is made for the benefit of the federal reservoirs in Wyoming during the non-irrigation season, February through April. The North Platte Decree Committee (NPDC) was established to assist in monitoring, administering and implementing the North Platte Decree. The NPDC recently amended the procedures for this requested call for administration to ensure that the PMP would not result in additional calls for water right administration during the non-irrigation season. The USBR has completed analyses that verify that with the change implemented by the NPDC, the PMP will not increase water right administration in the non-irrigation season.
    Pursuant to the North Platte Decree, the Pathfinder Modification stipulation states, in part: “The recaptured storage space would store water under the existing 1904 storage right for Pathfinder Reservoir and would enjoy the same entitlements as other uses in the reservoir with the exception that the recaptured storage space could not place regulatory calls on the existing water rights upstream of Pathfinder Reservoir other than the rights pertaining to Seminoe Reservoir.” (Emphasis added.)
    The 2006 Wyoming Legislature conditioned the funding for the PMP by specifying that if the Wyoming State Engineer honors a call for regulation of water rights upstream of Pathfinder Reservoir pursuant to the Nebraska v. Wyoming settlement, the Wyoming Water Development Office, in consultation with the State Engineer, must report to the Governor and Legislature’s Select Water Committee if the regulation was caused by the PMP. This condition will allow the state policy and decision makers to decide if the PMP is placing an undue burden on the water users in the Upper North Platte Basin and take actions as deemed appropriate.
    The USBR has petitioned Wyoming Board of Control to add the additional uses to the water right for Pathfinder Reservoir needed to implement the PMP. The UNPVWUA is challenging that petition. Apparently, the UNPVWUA is seeking absolute guarantees against future water right administration for the benefit of Pathfinder Reservoir. Absolute guarantees are impossible when dealing with the annual variations in water supplies in Wyoming. However, provisions in the Decree, the PMP stipulation and state law provide protection to Upper North Platte River Basin. Wyoming sought and obtained protections for existing water uses in the settlement of the Nebraska v. Wyoming lawsuit and the negotiations that lead to the Platte River Recovery Implementation Program. These goals were met in both cases, particularly relating to the river segment above Pathfinder Reservoir. Yet, the UNPVWUA continues to allege that the purpose of the PMP is to use water rights administration to shepherd water past headgates in the Upper North Platte basin for the benefit of Pathfinder Reservoir and endangered species in the Central Platte. This is simply not correct.
    Mike Purcell is Director of the Wyoming Water Development Office and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..
    This morning I assessed the hail damage to the barns at our south unit before heading to the office. Though I would not describe myself as a morning person, I love summer mornings. Several antelope were bedded down with our yearling steers in beautiful green grass on our high plains short grass prairie. It is fabulous grassland – clearly, to my way of thinking, grazing is the highest and best use of this land. Any appraiser would disagree with my assessment of highest and best use; this ranch is a stone’s throw from the city limits of Cheyenne, and is surrounded by development. Its days are numbered, and though all members of my family have braced themselves against sentimentality in preparation for our inevitable relocation, the one person who clings relentlessly to sentiment is the one who has spent the most time away from it – me.
    Nationally and in Wyoming ranch families are at a crossroads. The number of cattle ranchers has declined from 1,290,000 to 990,000 since 1990 (USDA Statistical Service, 2007). Between 1982 and 2001, 9.8 million acres of rangelands (an area the size of Maryland and Delaware combined) were converted to development. The average age of the Wyoming rancher is increasing, and those ranchers who have no family members to take over the family ranch are facing tough decisions at a time when our liberal U.S. Congress is considering capital gains tax increases and allowing the death tax to return.
    Taxes are how government controls your life. When Congress takes taxes from you, they have more and you have less. When you have less, you cut back – you make tough choices. When Congress has less, they print more money, raise the national debt, and sell U.S. Treasuries around the world. China holds reserves of over one trillion U.S. dollars while America has become the largest debtor nation in the world: that is unconscionable and unacceptable.
    As your Congressman, I will fight to make the tax cuts permanent, fight porkbarrel spending and oppose earmarks. I commit myself to fiscal discipline achieved through cutting wasteful spending, saving a portion of federal mineral royalties and maintaining tax treatments that encourage entrepreneurs and small businesses.
    High fuel prices affect Wyoming drivers and Wyoming agriculture more than is typical in the rest of the country; fuel prices represent a disproportionate percentage of Wyoming worker’s income. Current gas prices cut deeply into the slim profits or break-even status of agricultural producers and the small businesses that sustain Wyoming agriculture. To produce more fuel for America, I support increasing Arctic and deep sea drilling for oil and gas. An increase in production in the United States will increase supply, reduce price volatility and reduce our dependence on foreign oil, which is critical to our national security. Alternative energy sources such as wind and biofuels must also play a role in achieving energy independence, and agricultural producers will play a vital role in many types alternative energy production.
    Like three-fourths of Wyoming agricultural producers, I co-own a family cow-calf and yearling operation. Consequently, I support having the U.S. Department of Justice conduct a Sherman Act analysis of the proposed acquisition by JBS of Swift’s Greeley operation and the Five Rivers Feedlot. I am concerned about the business concentrations affecting our industry. I am pleased that Country of Origin Labeling is in the Farm Bill, although I understand why the President vetoed the exorbitant spending contained in the bill. The Farm Bill is an example of why the President should have line item veto authority, which would assist our nation in gaining some control over runaway spending.
    Regarding public lands grazing, Congress should extend the footnote which prevents the use of full-blown NEPA processes for renewal of unchanged grazing leases. Wyoming’s member of Congress must constantly educate fellow members about the importance of public and private lands grazing to maintaining healthy open space and wildlife migration corridors, reducing fire load and noxious weeds, and preventing irreversible land fragmentation. Public and private land, managed appropriately, can effectively preserve habitat for threatened species, game animals and livestock grazing.
    Health care has recently been identified as top concern of middle class Americans, small business owners and agricultural operators. I support health care legislation that allows individuals to aquire health insurance through organizations or associations that cross state lines and that health insurance policies should be transferable across all jobs; such legislation is an important tool for reining in the costs of health insurance. I look forward to working with Wyoming’s U.S. Senators Mike Enzi and John Barrasso on health care legislation; Wyoming is blessed with the strongest Senate delegation in the Nation on the issue of health care.
    Food policy will be a growing part of the health care debate. Fresh, safe, healthy meat and produce are identified with wealth in America, while overly processed foods and obesity are increasingly associated with lower socio-economic status. The family farm and ranch will play an enormous role in a vibrant and vigorous ‘nutrition revival’ – Americans want to know where their food comes from – if family ranchers and farmers differentiate their products in the marketplace. I am confident that family operations will not only survive but thrive in the new market environment, as long as we are willing to shed late 20th century fast food for a more savvy, health conscious society that is ready to learn how to use the most underulitized room in the house – the kitchen! Trade policy that prioritizes fairness and food safety is also essential to a healthy future for both the American producer and the American consumer.
     The people of Wyoming agriculture have never been more important to Wyoming than now. They are the stewards of Wyoming’s pivotal private lands. Agriculture has a dramatic and growing impact on the Wyoming economy – not because agriculture’s share of gross state product is growing - but for its critical role in sustaining open lands and wildlife habitat for Wyoming’s second largest private industry, tourism, and its largest industry, energy. Fifty percent of the winter habitat for Wyoming’s major wildlife species is on private land and 70 percent of all wildlife in Wyoming spend all or part of their time on private land, almost all of which is devoted to agriculture.
    Further, the people of Wyoming agriculture are also school board members, county commissioners, conservation district and water district board members. They support Wyoming churches, small businesses and youth and civic activities. The people of rural Wyoming are the nurturers of Wyoming. They cultivate and conserve Wyoming’s land and culture.
    This campaign has confirmed my belief that our citizens want Wyoming’s next member of Congress to take their values – conservative Wyoming values – to Washington and to exert strong leadership and an intense personal commitment to supporting these principles and working tirelessly every day to be Wyoming’s voice of reason in the Congress. I want to be that voice.
    Cynthia Lummis is a Republican candidate for Wyoming’s lone seat in the U.S. House of Representatives. Her campaign can be found on-line at www.lummis2008.com.
    There are a lot of reasons western landowners love to hate the wind – it’s relentless, constant, never ceasing, apparently infinite and now income producing. Although it has long been used to pull water from the ground for thirsty livestock and wildlife, it can now be used to keep livestock on the land.
    Wind energy is one of the fastest growing forms of electricity generation in the nation. Wind is a clean, inexhaustible, indigenous energy resource that can generate enough electricity to power millions of homes and businesses throughout the country.
    The development of a “wind farm,” or a wind energy project consisting of numerous wind turbines – not unlike a standard windmill, only much, much larger – creates two significant questions: First, who owns the wind? Second, how can a landowner profit from it?
    Generally speaking, a landowner owns both the land and the airspace immediately above it – including the right to use the wind. A landowner’s right to use and build on the surface of his property is well established and subject only to state or local zoning and property laws. Although the use of the wind blowing over the land should also belong to the surface owner, it can be complicated by the fact that wind doesn’t sit still – it “flows” across the surface of the land. Consequently, the construction of a barn, or other large structure, could obstruct the flow of the wind across your neighbor’s land.
    Nevertheless, the right to use or benefit from the wind that blows across your land may well be considered an incident of land ownership, similar to the right to extract oil and gas.
    Ownership of the surface estate of land may include the right to not only reserve the wind, but to also lease, sell, devise, inherit, partition, and hold the wind in various forms. Under certain circumstances, a landowner may wish to reserve wind rights, devise them to his children, or sever the wind rights from the underlying fee simple altogether.
    State laws vary on whether wind rights can be permanently severed or split apart from the surface rights of the land. In California, a state court held that wind rights can be severed from the land. In South Dakota, there is a state statute that prohibits such severing. Like in many other states, Wyoming courts or the Wyoming Legislature have not addressed the issue. However, until the state says otherwise, either through the courts or the legislature, the right to own and possess the wind lies with the surface estate.
    Profiting from the wind depends not only on who owns the wind to begin with, but who owns access to the underlying surface land. Since the wind is technically “free,” controlling access to the underlying land provides landowners an opportunity to supplement their incomes. Wind developers typically seek access to the land – in order to construct a wind farm including one or more wind turbines – by means of either a lease or an easement. Wind developers generally seek to negotiate for short-term rights for an initial exploration of the feasibility of their wind project while preserving the right to enter into more long-term arrangements if studies show a wind farm to be feasible and profitable.
    Since wind leases generally range from as few as five years, to as many as fifty years or more, landowners are well advised to put these agreements in writing and have them reviewed by an attorney prior to signing them. Among the various issues that should be discussed, are the following:
    Duration of the lease agreement. The agreement should specifically define the amount of time allocated for the wind developer to inspect and study the land for its feasibility for a wind farm. If the wind developer fails to begin construction of a wind farm within this amount of time, then the lease agreement should terminate automatically. Otherwise, the wind developer may tie up the land indefinitely with no prospect of ever constructing a wind farm.
    Similarly, the agreement should specifically define the amount of time allocated for an operational wind farm, once any wind turbines have been constructed and begin to generate electricity. Care should be taken to limit the duration of the lease and extensions sought by the wind developer.
    Financial compensation. Compensation comes in many forms and in exchange for many different uses. Nobody can guarantee that a wind farm will actually be developed on the property, consequently the only certainty that a landowner can have is to secure as much money as possible in the early stages of the lease agreement.
    We recommend that landowners should negotiate for an annual rental payment that periodically increases during the development period (the period used by the wind developer to inspect and study the feasibility of a wind farm on the land). Once construction begins, landowners should receive the annual rental payment and a “construction bonus” for each turbine installed on the property. After construction, when the turbines become operational and generate electricity for sale by the wind developer, the landowner should expect to receive an annual royalty – often a percentage of the gross revenues received by the wind developer for the sale of the electricity. The royalty should periodically increase. Additionally royalties should include a percentage of any money received by the wind developer in lieu of the sale of electricity, such as warranty or insurance proceeds or lump-sum start up fees paid by a utility in exchange for a contract to purchase electricity from a particular developer.
    Among the other uses for which a landowner can expect payment are: roads, transmission lines, substations, meteorological towers, and payments for access to in-holdings if the land includes a large amount of federal or state land within its boundaries. Moreover, a landowner should request to receive a “termination fee” if the wind developer terminates the lease agreement prior to construction. The landowner should be reimbursed under these circumstances since he will lose revenue for the period of time necessary to renegotiate with another developer.
    Importantly, since the value of the dollar is less today than it will be tomorrow, each payment should be periodically adjusted for inflation. Finally, the landowner must reserve the right to conduct an audit from time to time to verify he is receiving the amount of money guaranteed to him under the terms of the lease agreement.
    Future use of the land. The lease agreement should specifically identify the uses for which the wind developer may use the land, and reserve all other uses to the landowner. For example, the agreement should reserve all rights to mineral exploration and development to the landowner, as well as all hunting and fishing rights. It might be wise to reserve all the landowner’s water rights just to be sure. It is important that the lease agreement recognizes and acknowledges that the landowner will continue using his land for ranching and farming purposes.
    The landowner may also specify in the lease agreement any land features or characteristics that the landowner wishes to protect from the wind development. Such features may include: riparian areas, irrigation meadows, irrigation ditches, boulder formations, view sheds or any important or sensitive wildlife habitat.
    Liability. It is not uncommon for most lease agreements to include a provision requiring both parties to defend and hold each other harmless from claims for any future loss or damage arising from the various uses of the property. While such a provision, may seem reasonable, it couldn’t be further from the truth under these circumstances. Any loss to the landowner arising from the wind developer’s use and occupation of the land will be small compared to the potential loss to the wind developer. To put it in perspective, the cost to replace a landowner’s fence, barn, or even a good horse, is a fraction of the cost to replace a wind turbine or electrical substation. Typical landowners can not assume such risk, and even the smallest of wind farms are overly insured by the wind developer. Thus, landowners should limit their potential liability as much as possible – say, to the receipt of insurance proceeds, or some other specified amount. Otherwise, a single accident may result in the landowner losing everything, including his land.
    The lease agreement should also identify the amount of insurance coverage to be obtained by the wind developer and who shall be listed as insured parties.
    Taxes and Utilities. The lease agreement should assign any increase in property taxes to the wind developer. Otherwise, any increase in property taxes may be the responsibility of the landowner. In addition, any utilities necessary for the construction or operation of the wind farm should be the responsibility of the wind developer.
    Assignment of rights by the wind developer. The lease agreement will specify whether the landowner and the wind developer may assign the contractual rights and obligations to third parties. Wind developers always seek broad rights to sublease, assign, and mortgage their rights, without the consent of the landowner. Such broad rights may be necessary for the wind developer to obtain financing. Landowners should demand to be notified of every such transfer in order to keep track of who is ultimately responsible for any default of the lease agreement.
    Liens. Importantly, the lease agreement must require the wind developer to keep the land free and clear of all liens related to the wind farm. It is the responsibility of the wind developer, not the landowner, to contract for, and make payment for, all labor and materials related to the construction of the wind farm. The landowner must take care to ensure that no liens are filed against the land which are the responsibility of the wind developer. The landowner must not be held responsible in the event the wind developer can’t fulfill his obligations to pay for labor and materials.
    Governmental approvals. The lease agreement should specify that it is the obligation of the wind developer to comply with all state, county and federal laws, regulations and ordinances pertaining to the construction of a wind farm.
    Termination of the agreement. One of the most important provisions of any contract is the default and termination clause. While the wind developer will in all likelihood have the ability to terminate the project at any time and for any reason, the landowner, on the other hand, will only be permitted to terminate the lease agreement under very limited circumstances. The landowner should reserve the right to terminate the agreement if the wind developer fails to pay rent, fails to maintain adequate insurance, commits abandonment, fails to pay taxes, goes bankrupt, or fails or neglects to perform any obligation set forth under the contract.
    In the event of default, the wind developer will demand the right to be notified of any default, and the opportunity to cure the default prior to termination of the lease agreement. The landowner must take care to identify which party or parties are to be notified in the event of a default and to prohibit any “partial” default of the lease.
    Decommissioning and remediation of the wind farm. In the event of default, or termination of the lease, the landowner should specify how much time the wind developer is permitted to remove the wind turbines from the land. Payment must also be established during this time period. The landowner must also specify any increased payment or obligations in the event the wind developer neglects to remove the wind turbines in the specified period of time.
    In order to prevent the wind developer from simply “walking away” from the project, the landowner should demand a “decommissioning security,” to be established as soon as the wind turbines become operational. This security is generally a specified amount of money which is put aside by the wind developer to ensure there is sufficient funding available for removal and reclamation at the end of the project.
    Designating proper reclamation provisions is one of the most important aspects of the wind lease agreement. Reclamation is necessary during construction, operation, repairs, and after the project has been removed from the land. The landowner should not rely on the governmental authorities to protect the reclamation of his or her land, but should ensure that the land will be reclaimed as he sees fit. Specifying reclamation is also essential if the land contains any unique features, characteristics, or even wildlife habitat.
    Reclamation measures should identify the means to keep track of the original condition of the property, either through photographs or an assessment prepared by a range professional. Moreover, other reclamation measures should include: which improvements must be removed, and how deep under the soil such removal should occur; how topsoil is to be stockpiled and stored during construction; decompaction of the soil; reclamation of roads; revegetation; erosion; seeding; protection of revegetation; noxious weeds; dust control; and trash removal.
    Landowner Association. An average wind farm typically includes several thousand acres and is usually comprised of wind leases taken from multiple landowners. Landowners may want to consider forming cooperative agreements with their neighbors and adjacent landowners in order to amass significantly larger parcels of property in which to entice wind developers. The larger the parcel of the property, the more potentially lucrative the project may become for the wind developer.
    Miscellaneous. Finally, the lease agreement should address other issues such as which laws apply, in which state may either party go to court to enforce the terms of the agreement, attorneys fees, what happens to land included in a conservation reserve program or any other governmental program, and condemnation.
    Conclusion. The wind is quickly becoming a highly valuable natural resource to those who live and own property, thus landowners need to be aware of all the possible risks, as well as, benefits associated with entering into lease agreements for the development of wind farms on their property. As these lease agreements have the potential to last for fifty plus years, landowners need to take care to protect their property not only for themselves but the generations to come. While complex, these lease agreements represent a potential for landowners to supplement their income and are changing how many view the relentless, constant, and infinite resource that is the wind.